IEEJ：June 2021

©IEEJ 2021

Special Bulletin
A Japanese Perspective on the International Energy Landscape (539)

June 30, 2021

Key Points for Considering Energy Transition towards Decarbonization
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Throughout June, I had opportunities to participate in online discussions on global, U.S.,
European, Asian and Japanese decarbonization and relevant challenges from various angles. Thediscussions focused on how to promote decarbonization initiatives, how to achieve ambitious targets
and how to balance the achievement of greenhouse gas emission reduction targets with energy
security, economic efficiency and economic growth. The discussions came as Japan was seriously
considering a target energy mix for 2030 and 2050 to revise its Strategic Energy Plan. In thefollowing, I would like to make my personal comments on a future energy transition towards
decarbonization, based on the abovementioned discussions through various opportunities.
First, I felt anew that net-zero GHG emissions or carbon neutrality throughdecarbonization would be extremely ambitious or challenging targets for any country in the world.
At present, the world depends on fossil fuels for about 85% of energy supply, the European Unionand other advanced economies for about 80% (or more) and developing economies for nearly 90%.
To dramatically reduce the fossil fuel share and reach net-zero GHG emissions in the coming three
decades, revolutionary changes in our social, economic and energy systems will be required to occur.
There are sufficient reasons the fossil-based energy system has been developed. One reason is thatfossil fuels are competitive and available abundantly and stably. The current energy system has beendeveloped as a result of natural economic and social selection. The energy system comprises
enormous international and domestic supply chains linking energy development and final
consumption stages, energy equipment and consumption facilities, most of which are long-life
legacy assets that are used over a long time. Even if some large changes trigger great and quickchanges on a flow basis, any change on a stock basis tends to be mild due to the enormousness of theenergy system and the infrastructure’s long service life. Any large change on a stock basis takes
considerable time. This is an important fact.
Second, a number of countries in the world are about to change their courses to achievedifficult and challenging targets, despite the above-mentioned fact. National leaders havedemonstrated their political will to embark on a great voyage towards decarbonization one after
another, attracting growing support from various layers of society. More than 120 countries havepledged to reach carbon neutrality by the middle of the 21st century. The ambitious pledge is a
response to frequent abnormal weather events in recent years and to a rapidly growing awarenessthat the global environment should be protected to depict a sustainable future picture of the world.
The value of protecting global interests has attracted growing support and developed social andpolitical power. Another factor behind the enhanced decarbonization initiatives may be that theserious social and economic impacts of the COVID-19 pandemic since last year have led theEuropean Union and other economies to increasingly advocate that clean energy investment towards
energy transition for decarbonization would contribute to the recovery and long-term growth ofdevastated economies.
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IEEJ：June 2021

©IEEJ 2021

Third, clear and feasible means, methods or roadmaps to reach the target of net-zero GHG
emissions have yet to be given amid the political and social trends in which a number of countries
embark on the abovementioned great voyage. In the first place, there is the fact that only a limited
number of countries have indicated specific scenarios for decarbonization or net-zero emissions.
Those that have announced official energy scenarios (developed by government or quasi-governmentorganizations) are limited to the European Union, the United Kingdom, France, Germany, China andsome others. Most of the countries in the world have not prepared such scenarios. Even the UnitedStates under the Biden administration has not offered such a scenario. As noted above, Japan is now
preparing its scenario. In the absence of energy scenarios for reaching the targets, it is difficult todecide whether future initiatives would be effective or not. It is more important that even if suchenergy scenarios exist, they alone cannot lead anyone to conclude whether or not decarbonization or
net-zero emissions would be realized. If ambitious initiatives depicted in a scenario deviate far fromrealities, the development of any scenario may not be identical to the realization of decarbonizationor net-zero emissions. As a back casting approach is frequently used for depicting net-zero emissions
scenarios, these scenarios tend to deviate from realities. In the discussions in June, variousarguments were made about how the European Union, the United States and Japan would reach theirpresent emission reduction targets for 2030 before 2050. As 2030 comes in only nine years, how toreach the targets for 2030 is an urgent issue, a kind of “fight against time”. Anyway, the world seems
to be embarking on an uncharted great voyage towards decarbonization or net-zero emissions.
Fourth, an emerging common wisdom for the world is that innovations as well as existing
technologies would be required for the great voyage. The most interest-attracting innovation is theutilization of CO2-free hydrogen. The first step toward the utilization is the development of CO2-freeammonia technology. CO2-free hydrogen/ammonia technology is expected to play an extremely
important role in making non-power sectors carbon neutral after achieving net-zero emissions in thepower sector. CO2-free hydrogen/ammonia can be produced through various methods including theuse of renewable energy, fossil fuels and CCUS (Carbon Capture, Utilization and Storage)
technology and nuclear energy utilization, meaning that various countries and companies havepotential to play key roles on the supply side depending on resources endowment, energy
technologies and infrastructure. This is the reason for the current status representing ahydrogen/ammonia boom in many parts of the world. As a matter of course, important innovations
are not limited to hydrogen/ammonia. CCS (Carbon Capture and Storage) and CCUS technologies,
as well as negative-emission technologies such as the direct air capture of CO2, are expected to
become indispensable for net-zero emissions, attracting global interests.
Fifth, we must consider various differences between countries and other relevant players
when decarbonization is promoted for the global interest of climate change prevention. The
north-south issue, or the confrontation between advanced and developing economies, should be
prevented from escalating for the global interest of climate change prevention. Countries differ inenergy resources endowment, economic development, geographical, technological, infrastructure
and other conditions. Such differences are seen between advanced economies and between
developing and emerging market economies, and even among advanced/developing countries. It is
important for each country to tackle decarbonization based on its own conditions and realities.
Countries’ individual efforts should be supported by international cooperation to serve the global
interest most effectively. At a time when geopolitical relations have become more difficult as
indicated by the intensification of the U.S.-China confrontation, global initiatives are required forclimate change prevention as a global interest. Including the recent initiative between Japan and theAssociation of Southeast Asian Nations, efforts to balance decarbonization with sustainableeconomic development are required for the current world.
2Contact: report@tky.ieej.or.jp
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